New Report Predicts Continued Decline in Personal Bankruptcy Filings

According to a recent article in Reuters, consumer bankruptcy filings are likely to remain on the decline. Indeed, a Fitch Ratings’ Report showed that “annual U.S. personal bankruptcy filings are set for a fifth straight drop.” Based on that report, bankruptcy filings are predicted to fall by another 8 to 10 percent in 2015. In 2014, consumer bankruptcy filings fell by 12 percent from the previous year.
However, such declines in bankruptcy filings aren’t expected to continue in the coming years. The housing crisis and economic decline resulted in many Americans turning to Chapter 7 or Chapter 13 bankruptcy to get a handle on their finances. In recent years, though, the market has been recovering, and fewer families find themselves with debt burdens. But how long will that trend last?
More Consumer Credit Spending Likely
The Fitch Managing Director, Michael Dean, indicates that “the continued loosening of lenders’ underwriting guidelines and the increase to consumers’ access to credit should begin to slow the pace of the double-digit declines observed over the past four years.” To be sure, the amount of credit card debt that American consumers owe is on the rise. In 2014, that amount “rose for the fifth straight year” and totaled more than $3 trillion.
What types of spending are most Americans doing? Credit cards aren’t the primary mode of borrowing. Revolving credit accounts—primarily credit cards—haven’t seen much of an increase in the last several years. Indeed, that kind of credit usage “has remained relatively flat.” Where, then, are most Chicago residents spending? More people are using non-revolving credit. Last year alone, non-revolving credit usage rose by 8 percent.
Some of the most common kinds of non-revolving credit accounts include those for car loans and student loans. Dean emphasized that these types of borrowing have led to a consumer debt of more than $2.4 trillion. While 2015 likely will be another year of declining personal bankruptcy filings, with “reduced interest payments and full employment,” increased usage of revolving credit lines could lead to a shift in personal bankruptcy filings in the years to come. In other words, Dean suggests that increases in non-revolving credit accounts aren’t typically a reason why Chicago residents file for bankruptcy.
Reasons for Consumer Bankruptcy Filings
If non-revolving credit accounts normally don’t lead consumers to file for personal bankruptcy, what kinds of debts to lead to a decision to seek bankruptcy protection? Based on a recent study conducted by the Center for Consumer Recovery, the following are some of the most frequent reasons that consumers file for personal bankruptcy:
·      Debt collection litigation proceedings;
·      Aggressive debt collectors; and
·      Sheer volume of debt.
In other words, it’s not always the amount of debt the leads consumers to file for bankruptcy. While certain kinds of debts certainly can become unmanageable—such as medical debts or credit card debts—it’s more likely that a Chicago resident will seek bankruptcy protection if her creditor files a claim against her. Typically, debt collection litigation proceedings result from revolving credit lines like credit card accounts.
However, each situation is different. If you have concerns about managing your debts or dealing with debt collectors, it’s extremely important to discuss your case with an experienced Oak Park bankruptcy attorney. The dedicated consumer advocates at the Emerson Law Firm can discuss your case with you today.
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